Increasing Hotel ProfitabilitySix tips to offset rising labor costs with purchasing excellence, technology, and analytics.

Introduction

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Today’s hotels face many challenges. With rising labor costs and increased competition for guests, it can seem impossible for your hotel to remain profitable while maintaining brand standards.

Layer in the growing and influential world of social media and online reviews (which demands a flawless customer experience), and the need to look at environmental issues and sustainability, and your quest to improve your hotel’s bottom line becomes a daunting one.

To operate profitable business, your hotel must look for opportunities to:

• Increase Efficiencies: Where can you reduce administrative time? How can you streamline processes?Where can technology be leveraged to help?

• Increase Sales: How can you improve the guest experience to ensure positive reviews and repeat visitors?

• Lower Costs: What are your areas of expenditure? Where are the opportunities to reduce spend?

This guide outlines opportunities for areas of improvement and shares six ways you can increase your hotel’s efficiency — and your bottom line.

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1. Manage Inventory

Whether it’s fresh linens or fresh limes, managing your inventory is an essential part of every hospitality operation.

For supplies and food & beverage ingredients alike, you need to know what you’ve purchased, returned, and successfully sold. The right inventory management solution should also link to your original invoice and accounting systems, to ensure that you’ve only paid for what has been accurately delivered, and to give a precise understanding of the value of what you have on hand. This will also give you insight into cost of goods sold, potential profit, and revenue.

Buy Only What You Need

Build accurate forecasts, supported by precise stock counts — and integrate with front-of-house systems and POS feeds to make sure you connect back-office activity with front-desk demands. It’s also a good idea to report stock accounting on a weekly basis. An integrated system can deliver fast and accurate reports and produce an efficient, accurate inventory valuation for each location.

Eliminate Paper Processes

Inventory management traditionally depends on manual processes that are often inaccurate. This makes it virtually impossible to identify variances and accurately measure the performance of a location. With a mobile inventory management app, there’s no need to print count sheets and rekey data. Employees can even perform inventory checks when there’s no mobile signal: the data is uploaded to the system once they’re back on the network

2. Optimize Purchasing

As a hotel, the goods that you purchase are a direct reflection of your business. Whether you are purchasing ingredients for the food and beverage side of your business, or supplies, toiletries, and linens, your purchases must be high quality and delivered on time — and all within budget.

Reduce Paper and Administration

By automating your systems, you can reduce paper-based, manual processes and make sure you’re only paying for what you’ve ordered and had delivered. Checking that the details on the invoice match the original order and the goods received note will make sure that you’re not paying too much due to any mistakes.

And with a system that allows automated three-way invoice matching, you can manage invoices by exception, rather than having to go through each individual transaction.

EMPLOYEE ENGAGEMENT & RETENTION GUIDE 4

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Do Away with Rogue Purchasing

Many hotels make ad-hoc purchases from multiple local suppliers. It seems that chefs typically have their favorite vendors, beverage managers their go-to distributors, and outlet/department managers may rely on online retailers to fill in when necessary. This ad-hoc purchasing ends up being more expensive and it means that you are missing out on potential rebates or bulk discounts when spending thresholds are met. In order to reduce costs and waste, and to increase efficiencies, it’s important to gain total purchasing control.

• Enact a process that ensures purchases are made from pre-approved vendors.

• Use procurement technology to lock down supplier lists, ensuring that all sites can only purchase from specified and brand-compliant companies.

• Set a supplier delivery schedule through your ordering system, so orders placed outside the schedule are rejected.

Eliminating rogue purchasing will save your mangers time, ensure purchases are compliant and on-brand, increase efficiencies, and strengthen vendor relationships, while providing an opportunity to take advantage of rebates and lower rates.

3. Manage Vendors

It’s important to choose the right vendors and negotiate the best purchasing deals with them. It’s just as important to manage the ongoing relationship, to make sure all parties are communicating and working together toward common goals.

Establishing business partnerships means working together in trust and good faith. Once your vendors are invested in your success, you can work to ensure you are receiving the best pricing for the contracted products and services.

Get Visibility into Vendor Performance

Track how your vendors are performing by viewing balanced scorecards. See which are consistently late, delivering poor product quality or exceeding expectations. This knowledge can help build better customer-vendor relationships and provides opportunity to share tangible feedback.

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4. Improve Hotel Eatery Efficiency

Restaurants, bars, and room service are an integral part of the guest experience. With so many aspects of managing a hotel demanding your attention, it can be a challenge to achieve and maintain profitability for this part of your operations.

The food and beverages you’re serving and the menus you create need to drive and deliver profitability. Engineering menus and managing food waste at your hotel eateries are good ways to grow your bottom line. Menu engineering is the process of developing the recipes on your menus, while accounting for potential costs, waste, sales and profitability. Automating this process and moving it from spreadsheets to a menu engineering tool supports increased profitability and efficiencies, and helps you identify trends and opportunities.

Start Tracking Waste to Identify Where Savings Can Be Made

Perhaps a dish on your menu is regularly unfinished by customers. Is the serving size too large? If a single ingredient is frequently being thrown away because it’s going past its expiration date, is too much being ordered? Or is the ingredient underutilized on your menu? By gaining a good understanding of exactly what food and beverages are being wasted and why, you can adjust your menu and make informed changes to help drive savings.

Ensure Popular and Profitable Menus

Learn what’s selling and what isn’t with reliable reporting. Understanding the relative popularity of menu items and plotting this against their profitability can reveal the sweet spots — the dishes and drinks that are favorites for guests, and are cost-efficient for you.

Furthermore, tight control over your stocking policy will ensure that there is a close connection between sales and purchasing. Sites should only order products that are needed for the current iteration of your menu. Procurement technology virtually eliminates rogue purchasing of products that won’t be needed or used.

To ensure a highly profitable menu, it’s important to track ingredient prices, and to understand the impact of swapping ingredients in dishes before you make a change. By examining your menus and how they are performing, and using a “what if” scenario building tool to see what impact potential changes might have, you can identify areas where savings and improvements can be made. You’ll also have a chance to adjust the course before it’s too late. With the right system, your chefs and beverage managers will be able to see how different options will affect the cost to create each dish, and the margins that can be achieved. This gives you an opportunity to come up with creative solutions before getting locked into a dish that may end up costing you more than it makes.

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Give Customers What They Need to Know

Once you have your menu set, you need to make sure that the information is available to your guests. Menu publishing improves the guest experience by providing everything they want to know, and helps increase your visibility and profitability for potential guests, and local diners as well.

5. Use Analytics to Learn More About Your Business and Your Customers

Data that gives you insight into your operations, purchasing processes and financial performance, and that integrates with data from external sources, is the most valuable to your operation. The difficulty that most operators face is bringing that data together and creating something actionable from it.

Start by gaining an understanding of performance against key metrics. Use dashboards to support better and faster decision-making. When set up and configured correctly, these dashboards will help your business better predict outcomes.

Harnessing the power of all your data from an integrated system marks a shift from analyzing the past to forecasting the future. Adding an analytics solution to existing IT systems is cost-effective and gives you the evidence and insight you need to cut costs, improve efficiency, enhance guest satisfaction and boost the bottom line.

6. Leverage Technology

In today’s day and age, you have a wealth of tools to use to help you run your businesses more effectively. With the unique challenges of the hospitality industry–and hotels in particular–it can feel like a challenge to find a tech solution that takes the nuances into consideration and that can meet your complex requirements. The right technology must help eliminate error-prone manual processes, make it easy to collect and share data, and speed analysis.

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Select a Solution That Is Tailored to Your Specific Needs

Make sure the solution you purchase includes a number of different elements or modules so that you can grow with it and can add functionality as your operations expand. Modules you should look for include:

• Purchase-to-Pay

• Inventory

• Recipe and Menu Engineering

• Nutrition and Menu Publishing

• Analytics

Make Sure Your Solution Can Integrate with Your Financial Systems and POS

Your data should be sent directly from local operational systems to central financial systems without requiring manual input. This will help eliminate rekeying errors while speeding the process. The data sent should include everything from register records to payroll information to invoices.

An effective, fully-integrated system will provide a two-way interface between local and central departments, to make sure that reliable information is coded and shared correctly among departments and across sites. When all systems are working together, gaining insight into how your business is really performing becomes more simple — and actionable.

With the right system, you can achieve complete purchasing compliance, control your costs and take advantage of rebates or rewards. Through automation and simplification of purchasing processes, you also save resource and time, which further increases profitability. And, because you’re freeing your staff from the back office, they have more time to spend interacting with their teams and engaging with customers, both of which helps drive a more positive guest experience.

Conclusion

With all the demands of running your hotel, you’ve got a lot to manage — taking these steps can help you improve your profitability and productivity, while reducing the amount of busywork on your plate. Once you’re set up to better leverage your data and apply learnings backed up by strong, integrated analytics, there will be an even larger opportunity to generate savings by increasing efficiencies and reducing costs.

With all of your data in one place, you can have full visibility that will translate to better-informed decisions. A complete view of your purchasing and inventory data and financial performance will give you better insight into your highest-performing

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accommodations, your best days, and much more. Bringing in data from other applications can deliver even deeper insights. Equipped with that data, hotel operators can have new power to uphold brand standards, learn about — and cater to — guest behavior, identify areas for improvement, and make the right changes.

About Fourth

Fourth provides end-to-end, best-in-class technology and services for the restaurant and hospitality industries. Their supply chain and workforce management solutions, coupled with the industry's most complete data and analytics suite, give operators the actionable insights they need to control costs, scale profitability, improve employee engagement, and maintain compliance. Since its merger with US-based HotSchedules, Fourth serves more than 7,000 customers across 120,000 locations globally. For more information, please visit www.fourth.com.

Questions? Call us at +1.877.539.5156 www.fourth.com

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